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GG Co has a cost of equity of 25%. It has 4 million shares in issue, and has done for many years.
Its dividend payments in the years 20X9 to 20Y3 were as follows.
End of year Dividends
$’000
20X9 220
20Y0 257
20Y1 310
20Y2 356
20Y3 423
Dividends are expected to continue to grow at the same average rate into the future.
According to the dividend valuation model, what should be the share price at the start of 20Y4?
$0.96
$1.10
$1.47
$1.73 .Sir I have calculated dividend growth (220/423)to power 1/4_ 1 but they have taken opposite why sir
Because it is growing from 220 up to 423, and we need the average growth rate each year.
(20Y0 is the year after 20X9 – this may have caused the confusion, but in the real exam they will use proper years, not use X and Y’s 🙂 )You are right sir x and y confused me thank you very much sir best teacher of acca john sir….. No one can be like you sir never ever in this planet..
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